What would you do if you learned that 45% of your customers were first-time buyers of your product and 90% of those buyers gave up on your product within the first year? Fender Guitars CEO, Andy Mooney, faced this exact same problem as he took the helm of the legendary 70 year old company. On top of that abandonment rate add in the intimidation of actually buying your first guitar in a store and a wide mismatch of marketing tactics with actual target audience and you’ve got what the kids would call, “a real head scratcher” on your hands.
You can’t change if you don’t know who you’re serving
The first thing Mooney did was dig into the research to understand who Fender’s customers are today. Three remarkable data points emerged:
- Nearly half of all new guitar buyers are first-timers. 45% of every Fender guitar sold went to somebody who had decided to learn guitar.
- Half of those new buyers were women.
- Engagement with the guitar is a two-bump curve. People engage when they’re young, until they start having families. Then engagement falls off until the kids leave home. At that point Fender saw a spike in engagement again.
Finally, Mooney, did the math. The average lifetime value of a Fender customer is $10,000 in guitars, amps and accessories. With a million new guitar buyers each year in English-speaking countries alone and that pesky 90% abandonment rate, doubling retention to 20% to 200,000 committed players opens up a billion dollars of new revenue opportunity.
Enter Fender Play and Fender Songs
It turns out that music stores are intimidating. As Mooney put it, it’s a club that you can only get into by already being in it. If you’re new to the instrument and particularly with a lack of women sales associates, most new guitar purchases happen online. With the goal of teaching new guitar players how to play and, at the same time, encouraging existing players to stay engaged with their instrument, Fender realized that “online” was exactly how to solve this.
A quick search on YouTube will reveal thousands of guitar lessons, chords for songs and technical tutorials. Mooney saw the same thing for nearly every other industry. And yet, people were still paying for formal online learning services like Lynda.com. Why? Consistency and quality. YouTube is great if you’re willing to tolerate occasionally low quality recordings, teaching methods and inconsistent learning trajectories. Formalized online educational sites invest in solving those problems. Fender would do the same with Fender Play and Fender Songs.
(Note the marketing images chosen — not the classic “guitar god” imagery you’d expect from a guitar company.)
Both online services were designed to solve the customer problems discovered in the customer research. Fender Play gets new players up and running quickly. It teaches them songs based on their desired playing style and favorite songs. Fender Songs takes already-competent players and allows them to build playlists of songs they want to learn, clean chord layout and features that enable easier learning of the songs. All of this at high quality. The cost is kept low — at $42/annually it’s literally less than one live guitar lesson.
These online services are designed to generate revenue, obviously, but they are also designed to generate engagement and ultimately more hardware purchases. As consumer behavior continues to evolve the digital services can evolve with it allowing Fender to pivot over time based on real-time market feedback. And, as an additional bonus, when someone is trying to learn a new song they stream it at least 20 times making the record labels and artists all too willing to make their material available.
Product management work solves business problems
Reading the story of how Fender is evolving their business, I found myself nodding in agreement throughout. This is classic, good product management work. Mooney and the team at Fender:
- Used secondary and primary research to understand the market, target audience and the entire value chain including the critical in-store purchasing experience (which they don’t control)
- Did a deep market analysis to build a model of their addressable audience and potential revenue upside
- Leaned heavily into technology to deliver continuously improving, high quality services that exploited the flaws in competing services
- Beta tested, iterated and improved the service prior to launch
- Set clear OKRs for determining the success of their product
- Built a go-to-market strategy that addressed not only actual new guitar buyers but other players in the ecosystem that can help them deliver a great service
There’s a lot to learn from this story. The biggest takeaway, in my opinion, is that there is no shortcut to success. You can’t just magically divine a brilliant new product idea and push it to market to broad acceptance and adoption. You have to do the work. Understand the customer. Dig into the market. Leverage technology to test new ideas. Get out of the building to see how humans behave in the real world. Test. Iterate. And ship again. Continuously.